The debt:I'm from Mexico and in 2004 I bought a 3br house there for 125k. I have since relocated to the US, across the border to San Diego, but still owe about 70k on the mexican property. My monthly PITI payment is $1,000 and I rent it out for $600. So every month I'm out $400 to cover the payments.
The interest rate is 12% and by far my most expensive debt. I have 30yr mortgage in the US 180k @ 4.3%. My take home pay is $6500 a month, with $4500 in expenses
Equity wise the house can easily sell for 100k today. Rent wise I'm renting it on the low end since I don't want to risk losing my tenants and having to cover the mortgage payment myself. Property taxes are really low over there and I pay $70 a year.
The plan:I currently have 40k in exercisable vested stock options with my employer + plus 25k in cash savings.
I'm thinking of cashing out the stock options and paying it off. I would go from being out $400 every month to being up $600. The stock options would be taxed at 25% so 10k in taxes, but I'm going to be out 10k in interest payments in the next year alone. I would also be diversifying away from my employer's stock into real estate.
Other options:- I could always sell the property and hope to get 20k out of it after taxes and commissions. There's the risk of the house not selling, losing my tenants, etc.
- Bail on the property and keep the 70k
- Keep the stock options, continue saving 2k a month and try to pay it off next year
There are also risks with investing in Mexico. My biggest fear being the currency exchange rate, but it has been stable for the past 10 years. I see this as a potential retirement location down the road.
Does this make sense from a cashflow perspective ? It looks like a no-brainer to me. I stop the bleeding on the interest and get income out of it, plus I have enough equity to sell in the future and at least get back my 70k. There's also all the money I've put into it: 20k downpayment + 9 years of interest. But I see that as a sunk cost. Is that the right way to look at it ?